Return Rate

Ecommerce returns are something most online merchant’s face. Product Returns can increase business costs, leading to low profit margins.

Having a return policy will dramatically increases the likelihood of a visitor buying from your store. Customers want to be assured that if they receive a damaged or wrong item, the item can be returned. 

With so many customers trying to return products, it can be difficult to balance customer satisfaction and the costs of your business. But don’t worry! We have a few tips that will help you lower the return rate and increase your profit.

What is the meaning of Return Rate?

The return rate is the percentage of returns against net sales. Unless you have a no-return policy for your orders, returns are unavoidable. You can manage is the number of returns you get if you have an effective return policy.

How do you calculate the return rate?

To calculate returns simply determine the cost of the units returned and divide by total sales of a certain period. 

RR= (cost of units returned/ Total sales) *100

For example, a customer orders 8 dresses costing $120 and later returns dresses worth $30. The return rate would then be;

RR= (30/120) *100= 25%

online purchases have an average return rate range of: 20-30% .

What is the impact of a high return rate?

  • Initial front-end costs of returns

An increase in returns leads to increased expenses like hiring more workers to prosess returns, increase warehouse space. The returned products are inspected to determine the category they fall in. They are either resold or liquidated. If liquidated, they are sold at a lower price than the original one.

  • Multiple inconspicuous costs

These are hard to calculate costs, for example, time wasted in inspecting and accounting for the returned goods. 

Also, back and forth communication with customers, and to and fro movements of delivery persons.

  • Impact on brand image and customer churn rate

Everyone is online these days, almost all the companies are online, and that influences how customers shop nowadays. Before a customer shops on your website, they will mostly look at other customer’s reviews. 

If your customers get a bad shopping experience, they will write a bad review which in turn discourages returning and new buyers. When a consumer receives a product that does not meet their expectations and there is no clear way to deal with the product returns, they are more likely to write a negative review.

How to control your return rate?

Return rates affect profits, brand image, and others. It is crucial to avoid high return rates and keep them minimal.

These are 3 ways that you can improve the returning rate.

1. Provide clear product descriptions

What you see isn’t what you always get is a common phrase in online shopping. Customers can see a nice-looking leather handbag but what they get is a cheap quality handbag that is not even in the right color.

Give a detailed product description explaining the material, size, and everything the customer needs to know about the product. The number of returns will reduce and customer’s expectations will be equal to reality. Also, the product photos should match the actual product including the correct colors.

2. Research the commonly returned products

Include a short survey or feedback session during the returns process. Get to know why customers return the items. Is it the color, fitting, or sizing that is wrong? Once you know why you can talk to the manufacturer and make corrections. If the return process is easy and stress-free, then more customers will provide feedback.

3. Adopt a liberal returns policy

A liberal policy makes the customers trust you. If you put strict measures in returning items, customers may think that you’re avoiding returns. But if you put lenient measures like increasing the return time window from 30 to 60 days, customers get more time to try out the product. Having more time with the product reduces the urgency to return it.

RESOURCES

What is considered a return?

Shopify Returns

Returns vs. exchange

Product Returns Factors

Returns Best Practices

Returns Metrics

Easy Shopify Returns & Exchange

We know handling returns and exchanges can be a pain. ReturnGO makes it easy for your customers to request a return or exchange in just a few clicks!

ReturnGO’s returns & exchange portal gives your customers the best alternative to return refunds while maximizing your profits.

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